TMI Blog2016 (12) TMI 1769X X X X Extracts X X X X X X X X Extracts X X X X ..... t while passing the order u/s 153A r.w.s. 143(3) of the Act. Thus, we hold the making of addition in non-abated assessment for the A.Y. 2007-08 as void ab initio. Consequently, the addition made in the present assessment order passed u/s 153A/143(3) for the assessment years 2007-08 is deleted. Addition of share application money - HELD THAT:- Assessee has complied with all the information which was desired by the Assessing Officer to be submitted. Therefore, we are of the view that no addition is called for as we have already held in Anant Steel P. Ltd. vs. ACIT [2015 (11) TMI 1758 - ITAT INDORE] following the judgment of Lovely Export (SC), that if at all the Assessing Officer is not satisfied with the genuineness of transaction, then the Assessing Officer is at liberty to make the addition in hands of that co. In decision of Hon'ble Delhi High Court in the case of Principal CIT vs. Softline Creations P. Ltd. [2016 (9) TMI 255 - DELHI HIGH COURT] it has been held that assessee has duly discharged burden of proof by providing necessary information and inability to produce share applicants could not lead to an adverse inference - ground of the appeal of the assessee is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos without any basis has no legs to stand. We thus find no substance in the action of the learned CIT(A) in enhancing the sales of the assessee on ad-hoc basis by 20% of the sales shown in the audited accounts Suppression of commodity trading income - Excess claim of transaction charges - HELD THAT:- the transaction charges have no direct nexus with the commodity trading income for the reason that such charges are invariably required to be paid at a fixed rate by a dealer/broker in the forward commodity market to the respective commodity exchanges irrespective of the outcome of the transactions. So, even for losses, one would be required to pay the transaction charges. Further, the commodity forward transactions are speculative in the nature and net result of transactions for one year cannot be compared with that of the other year. We find that except making the guess work, the learned CIT(A) has not brought on record any material for his presumption of suppression of commodity trading income. In such circumstances, there was no reason for the learned CIT(A) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gold rate was low as compared to the rate of previous couple of days and the assessee has shown to have sold the excess stock on 28-01-2011 for booking loss of ₹ 7,40,297/- on sale of unaccounted investment. We have already held that no evidence found as regard to suppression of any sale. In such circumstances, we are of the view that the ld. CIT(A) was justified in deleting the entire addition holding that the AO failed to prove that sale bills of bullion were bogus. Even before us, no contrary material has been brought on record by the Revenue to controvert the findings of the ld. CIT(A). - IT(SS)A No. 257, 258/Ind/2015 & ITA No.568/Ind/2015, 262/Ind/2015 & ITA No.623/Ind/2015 A.Ys. 2007-08, 2010-11 & 2011-12 - - - Dated:- 8-12-2016 - Shri D.T. Garasia And Shri O.P. Meena, JJ. Assessees by Shri Anil Kamal Garg and Shri Arpit Gaur, CAs Respondent by Shri Lal Chand, CIT ORDER Shri D.T. Garasia, The above appeals by the assessee and Revenue are directed against the different orders of ld. CIT(A) dated 18.3.2015 29.5.2015. Assessee s appeal bearing IT(SS)A No. 257/Ind/2015 (A.Y. 2007-08) Assessee s GROUND No. 1 This ground of appeal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees. Since, while opening the envelope in the name of the group assessees, sent by the AO through Speed Post, the group assessees were not aware of this tactic of the AO and, therefore, as an honest and bona fide receiver of the envelope, they opened the envelopes in the normal course and got terribly shocked with the blank papers only found in the envelope. However, the appellant company upon noticing the tactic of sending bunch of plain papers as adopted by the AO, did not open the envelope purported to contain the impugned assessment order but kept the same preserved. It is submitted that instead of the opening the envelope, the appellant carried such envelopes before the AO and his higher authorities. On complaint, the AO admitted that bunch of blank papers got to be sent by his office but according to the AO, it was only a clerical error. Thereafter, as on 02-04-2013, the impugned assessment order actually happened to be served upon the appellant by hand delivery. It is submitted that the appellant is prepared to file an affidavit in support of the facts stated hereinabove if so directed by Your Honour. 2.01 From the facts narrated above, it is evident that the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal sanctity and force and consequently, the same deserves to be quashed in limine with the natural corollary thereof that the demand raised in consequence of such an illegal order deserves to be directed as not enforceable against the appellant. 4. The ld. DR relied on the orders of the Revenue Authorities. 5. We have considered the rival submissions of both the parties and gone through the material available on the file. We find that the assessee has taken the ground that the order is passed on a date beyond the prescribed limit u/s 153B(1)(a) of the Act. As per the assessment order, the date of the assessment order is 28.3.2013 but there is no evidence before us that the order has been passed by the Assessing Officer after expiry of limitation. We find that the Assessing Officer had passed the order in time but it was dispatched on later date but it does not mean that the order is passed after the period of limitation, therefore, we dismiss this ground. Assessee s GROUND No. 2 6. This ground of appeal of the assessee is directed against the action of the ld. AO in invoking the provisions of section 153A on the ground that for such year, during the course of searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008. A search under s.132 of the I.T. Act, 1961 was conducted in the premises of the assessee on 25-11-2010. In pursuance of the search, a notice under s.153A was issued on 29-11-2011 requiring the assessee to file its return of income. In response to such notice, the assessee filed its return under s.153A on 01-02-2012 declaring the same total income of ₹ 16,74,610/- as was declared by it in the original return under s.139. During the course of the assessment proceedings, the AO noted that the assessee had received amount by way of share application money from penny stock companies of Indore and Calcutta. The AO noted that during the relevant previous year, the assessee had issued 75000 shares at a premium of ₹ 90/- on each share of face value of ₹ 10/-. Out of these 75000 shares, the AO noted that 60000 shares were issued to five companies of Indore and Calcutta. During the course of the assessment proceedings, the assessee furnished various documentary evidences such as copies of the share application forms, copies of memorandum articles of association of share applicant companies, copies of certificate of registration, copies of audited balance sheets, copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2007-08, the appellant company had furnished its original return of income under s. 139(1) of the Act on 13-10-2007 vide acknowledgement no.483260131007 with the then ITO-2(1), Indore declaring an income of ₹ 16,74,608/-. 1.02 In response to the return furnished under s. 139(1), no notice under s. 143(2)was issued to the appellant uptil 31-10-2008 i.e. the time limit prescribed under the then prevailing s. 143(2) of the Act being expiry of 12 months from the end of the month in which the return was furnished. Accordingly, the assessment was deemed to have been framed under the provisions of s. 143(1)(a) of the Act. 2.01 In the case of the appellant the search was initiated on 25-11-2010 and, therefore, it can be safely concluded that on the date of the search, the assessment proceedings of the appellant for the assessment year under consideration i.e. A.Y. 2007-08 were not pending and the same were complete in all respect. In other words, the assessment year under consideration was not a year which can be said to be a year of abate as contemplated under the second proviso to s. 153A of the Act. 3.01 In the instant case, the impugned assessment order has been pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposition that the section 153A cannot be invoked in each and any case but it can be invoked only for the purpose of making an assessment or reassessment in the case of a person in whose case either a search under s. 132 is initiated or a requisition under s. 132A is made. The sole purpose of the section 153A is to bring home the tax on the undisclosed income, unearthed during the course of action under s. 132/ 132A, to the kitty of the ex-chequer. It is submitted that the section 153A is not meant for assessing/ reassessing any income which in the opinion of revenue authorities has escaped to the assessment and for that there are other provisions such as section 147 and section 263 in the statute. Although, not explicitly stated, the provisions of section 153A are aimed for making the assessment/reassessment, for six assessment years, of the persons searched/ requisitioned, only, on the basis of money, bullion, jewellery, other valuable articles or things or books of account or documents found and seized either under s. 132 or requisitioned under s. 132A. In other words, subject to certain exceptions, as discussed here-in-after, under the scheme of the law any assessment/ re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A is limited and restricted only to the undisclosed income based upon the incriminating material/ undisclosed assets found during the course of search/ requisition. 4.04 It is submitted that the scheme of section 153A takes within its sweeps not only the assessment/ reassessment for those completed assessment years in respect of which either the assessments under s. 143(3) have already got completed previously or the time limit for issuance of notice under s. 143(2) have got expired but it also include those assessment years in respect of which either the assessment proceedings were pending or the statutory time limit for issuance of notice under s. 143(2) were alive, on the date of initiation of the search. The later situation has been contemplated under clause (b) of sub-section (1) to section 153A of the Act which prescribes that all the assessment proceedings which are pending on the date of search shall get abate. It is so because while legislating the law the legislature were not intending to carry out two parallel assessment/ reassessment proceedings for the same assessment years under two different sections which was the situation prevalent in the old block assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment under s. 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. 5.02 The Hon'ble Special Bench of ITAT in the case of All Cargo (supra) at para (5) of the Order has impliedly stated that even in a case where the assessment proceedings are completed under s. 143(1)(a), it has to be taken that the proceedings are completed and these are not pending and consequently such proceedings would not get abated. 5.03 The Hon'ble Mumbai A Bench of ITAT in the case of Atithi N. Patel vs. ACIT in ITA No. 43/Mum/2010 following the decision of the Hon'ble Special Bench in the case of All Cargo held that in respect of those assessment years for which assessment proceedings had attained finality, the additions can be made only on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 17-05-2013] ix) Smt. Sunita Bai vs. DCIT (2015) 68 SOT 0098 (Panaji) (URO) x) DCIT vs. Reliance Granite P Ltd. (2015) 43 CCH 0028 (Hy. Trib.) 6.01 In view of the facts and circumstances of the case of the appellant and various judicial pronouncements, it is submitted that since the assessment year under consideration was a year in respect of which assessment proceedings had got completed and the same was not pending on the date of the search, any addition which is not based on any incriminating material found during the course of search is not legally sustainable and the same deserves to be knocked out on the threshold itself. 1.01 At the outset, it is submitted that the learned AO grossly erred in making the impugned addition of ₹ 60,00,000/- on account of the alleged failure of the appellant to establish the genuineness of the share application money received by it from 5 companies merely on the basis of various documents and materials furnished by the appellant itself either during the course of post- search enquiries or during the course of the assessment proceedings without considering the material fact that the assessment year under consideration was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 207, Maharishi Devendra Road, Kolkata AAACF3773G 10,00,000 3 M/s. Remo Engineering Works Pvt. Ltd. Ground Floor, 10-B, Sikandarpura Estate, Kolkata AABCR5848R 15,00,000 4 M/s. MGM Tools Pvt. Ltd. 241, Apollo Tower, 2, M.G. Road, Indore AABCM1733A 11,00,000 5 M/s. Convenient Housing Finance Ltd. 241, Apollo Tower, 2, M.G. Road, Indore AAACC6705H 16,00,000 TOTAL 60,00,000 3.01 That, during the course of the assessment proceedings, the learned AO vide query No. 7 of the Notice dated 12-10-2012 issued under s. 142(1) of the Act (kindly refer PB Page No. 36) had required the appellant to establish the genuineness of share application money received by it during the various previous years relevant to the assessment years under scrutiny before him. 3.02 That, in response to the specific query as aforesaid, the appellant compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard the identity of the share applicant companies, it is submitted as under: i) That, all the share applicant companies are duly registered under the Companies Act, 1956. The details of Corporate Identification Number [CIN] allotted to each of the share applicant companies, by the Registrar of Companies, Government of India are being given as under: Sno. Name of the share applicant company CIN 1 M/s. Bhanu Computron Ice Equipment Pvt. Ltd., Kolkata U52392WB1993PTC059892 2 M/s. Fedder Tie-up Pvt. Ltd., Kolkata U74140WB1996PLC078294 3 M/s. Remo Engineering Works Pvt. Ltd., Kolkata U28999WB1993PTC059793 4 M/s. MGM Tools Pvt. Ltd., Indore U45400MH1995PTC243836 5 M/s. Convenient Housing Finance Ltd., Indore U45400MP1993PTC007890 ii) That, the share applicant companies being artificial juristic persons having no physical existence have been incorporated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation as well as during the course of the assessment proceedings, Shri Satyanarayan Gadiya, a Chartered Accountant by profession, holding the position of a director in both the companies got himself appeared before the authorities in response to the summons issued under s.131(1A)/131(1) of the Act. Shri Satyanarayan Gadiya also made his statements, on oath, before the authorities as is evident from the findings given by the learned AO himself at para 4 of page No. 3 and para 1 of page No. 5 of the impugned assessment order. (vii) It is submitted that since in the instant case all the summons issued under s. 131 and notices issued under s. 133(6) have got served to the share applicant companies, it has to be necessarily held that the appellant company could be able to establish the identity of these share applicant companies beyond doubts in view of the decision pronounced by this Hon ble Bench of ITAT itself in the case of M/s. Agrawal Coal Corporation Pvt. Ltd. Vs. Addl. CIT 18 ITJ 717 (Ind.) Trib. It shall be appreciated that in the case of M/s. Agrawal Coal Corporation, the notices/summons issued by the AO to the share applicant companies had got returned and under such ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e No. 5 of the impugned assessment order, it can be gathered that Shri Satyanarayan Gadiya in an unequivocal term has confirmed making of investment amounting to ₹ 16,00,000/- and ₹ 11,00,000/-, aggregating to ₹ 27,00,000/-, by his two companies in the appellant company through account payee cheques. 6.03 As regard the creditworthiness of the share applicant companies, it is submitted as under: i) That, all the share applicant companies were having ample funds for making investment in the share applicant companies. In evidence of such fact, we are submitting herewith copies of the audited financial statements of the share applicant companies for the financial year ended on 31-03-2006 which are placed at Page No. 244 to 308 of the Paper Book. On a perusal of the audited financial statements, it shall be observed that all the companies were having their own funds to justify the making of investment in the appellant company. For a ready reference, the details of owned funds i.e. Share Capital and Reserves Surplus of each of the share applicant companies, as per their respective audited financial statements as of 31-03-2006, are given in a tabular form as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant's case. 8.02 It is submitted that in the instant case the AO, except recording the statements of directors of two of the companies, has not conducted any other enquiry and even if such enquiry was conducted, the appellant has not been confronted with such enquiry. In such circumstances, in view of the decision of the Hon ble Supreme Court in the case of Kishanchand Chelaram Vs. CIT (1980) 125 ITR 713 (SC) no adverse view can be taken against the appellant. 9.00 It is submitted that the CIT(A) merely on the basis of guess work and conjectures held the share applicant companies as accommodation entry providers. The CIT(A) merely on the basis of copies of the income-tax returns and financial statements of such share applicant companies, held that these companies were not having creditworthiness. The CIT(A) has also disbelieved the transaction of share capital on the extraneous consideration of amount of share premium per share. However, it will be appreciated that the CIT (A) could not bring on record any cogent material to establish that the share applicant companies were not in existence. The CIT(A) has also not found any defect in the various documentary ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the assessment year under consideration was not a year which can be said to be a year of abate as contemplated under the second proviso to sec. 153A of the Act. Thus, the assessment is not abated and therefore without finding any incriminating material, no additions can be made. In the present appeal, we find that no incriminating material was found and the Assessing Officer made additions on the material which are already disclosed in the books. The Ld. CIT(A) after discussing some various case laws dismissed this ground. He was of the view that even if no incriminating material is found, a normal assessment has to be made under s. 153A of the Act. We find that no incriminating documents were found during the course of the search for the A.Y. 2007-08 which is evident from the assessment order wherein the additions were made on the materials which have already been shown in the books of accounts and also shown in the balance sheet filed along with the return or disclosed in the return. Ld. DR has defended the action of the Revenue Authorities but could not controvert the factual submission made by the ld. AR of the assessee on the issue of incriminating material. Keeping in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/s 132 of the Act or a requisition has been made u/s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/s 153A of the Act. Once notices are issued u/s 153A of the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed accordingly. 14.1 We also find support from the decision of Hon ble Gujrat High Court in case of Principal CIT vs. Sumaya Construction P. Ltd., 387 ITR 529 (Guj) wherein the Hon'ble High Court has followed the decision of Rajasthan High Court in the case Jai Steel vs. ACIT, 1 ITR OL 371. The Gujarat High Court has also approved the decision of Kabul Chawla, 380 ITR 573 (Delhi). Thus, we, following the above order of this Bench and various High Courts as cited above, allow the present appeal filed by the assessee for the assessment year 2007-08 on the issue of section 153A r.w.s. section 143(3) of the I.T. Act wherein it has been held that in absence of any incriminating documents found and seized during the course of search, the Assessing Officer is not justified in making the additions in non-abated assessment while passing the order u/s 153A r.w.s. 143(3) of the Act. Thus, we hold the making of addition in non-abated assessment for the A.Y. 2007-08 as void ab initio. Consequently, the addition made in the present assessment order passed u/s 153A/143(3) for the assessment years 2007-08 is deleted. Accordingly, this issue of incriminating material involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we are of the view that no addition is called for as we have already held in Anant Steel P. Ltd. vs. ACIT, following the judgment of Lovely Export (SC), that if at all the Assessing Officer is not satisfied with the genuineness of transaction, then the Assessing Officer is at liberty to make the addition in hands of that co. In decision of Hon'ble Delhi High Court in the case of Principal CIT vs. Softline Creations P. Ltd. (2016) 387 ITR 636 (Del) decided on 31st August, 2016, it has been held that assessee has duly discharged burden of proof by providing necessary information and inability to produce share applicants could not lead to an adverse inference following the decision of Hon'ble Supreme Court in case of CIT vs. Lovely Export P. Ltd. (2008) 216 CTR 195 (SC). Accordingly, this ground of the appeal of the assessee is allowed. Assessee s appeals bearing IT(SS)A No. 258/Ind/2015 (A.Y. 2010-11) IT(SS)A No. 568/Ind/2015 (A.Y. 2011-12) DEPARTMENTAL APPEAL bearing IT(SS)A No. 262/Ind/2015 (A.Y. 2010-11) AND IT(SS)A No. 623/Ind/2015 (A.Y. 2011-12) Assessee s GROUND No. 1 (For A.Y. 2010-11 and A.Y. 2011-12) 15. These grounds of appeal of the assessee are di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of the assessment proceedings, the assessee produced the books of account and documents/ vouchers/ bills etc. which were test checked. The assessee had also filed audited financial statements and tax audit report obtained under s.44AB of the Income-Tax Act, 1961. The AO noted that the assessee had made huge cash sales without maintaining any details as regard to name and addresses of the customers. The AO also found that the assessee had deposited heavy cash in its various bank accounts and many a times, these cash deposits were not matching with the cash sales. Accordingly, on 22-01-2013, the AO issued a show cause notice under s.145(3) of the Act to the assessee for rejection of books of account. In compliance to such show-cause notice, the assessee made its reply which has been reproduced at para 3.3 at page no. 12 to 17 of the Assessment Order. Upon receipt of the reply, the AO held that books of account maintained by the assessee are defective and the assessee could not furnish the required information called through its questionnaire. Finally, the AO rejected the books of account of the assessee on the various grounds taken by the AO at para 3.4 of the order which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was required to do so vide questionnaire dated 12-10-2012 whereas it made the request after passing of three months. ix) The assessee failed to furnish the reply of question no. 30 31 of the notice dated 12-10-2012. In absence of such details, the gross profit of the assessee could not be assertions. x) The assessee could not furnish the name and addresses of the cash purchasers. xi) The assessee had sold the additional stock surrendered by it at a loss of ₹ 6 Lakhs. xii) During F.Y. 2010-11 relevant to A.Y. 2011-12, the assessee had shown gross profit of ₹ 575.66/- on sale of per 100 Gms. Gold Bullion whereas some M/s. M.P. Bullion had shown the same at ₹ 798.54/- per 100 Gms.. xiii) The price of the Gold Bullion and Silver Bullion have increased many fold during F.Y. 2008-09 to F.Y. 2010-11 and every year, the assessee had shown closing stock thereby the gross profit of the assessee must have been increased in subsequent years. 20. Matter carried to learned CIT(A), who upheld the action of the AO of rejecting the books of account. The various reasons assigned by the CIT(A) at para 8.1 of his order are summarized as under: i) During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account in accordance with the various provisions of the Companies Act, 1956 as well as under the provisions of section 44AA of the Income-Tax Act, 1961. All the books of account along with relevant documents/ vouchers were duly produced before the AO as is evident from the findings given by the AO himself at 1st para on page No. 2 of the impugned assessment order. 2.00 That, the appellant company has maintained its books of account by consistently observing mercantile system of accounting and as also by observing all the Accounting Standards as notified under the provisions of sub-section (2) of section 145 of the Income-Tax Act, 1961. Even the AO has not casted any doubt on the method of accounting as well as observance of the prescribed Accounting Standards by the appellant company. 3.00 That, the books of account of the appellant company were subjected to audit by a firm of qualified Chartered Accountants, both under the Companies Act, 1956 as well as under s. 44AB of the Income-Tax Act, 1961. The appellant company had obtained Audit Reports under both the enactments and the same were also placed on the record of AO. Auditors did not find any discrepancy or defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted the correctness of the above said details of the stock tally. 6.00 That, during the course of the search and seizure operations, carried out in the appellant's premises under s.132 of the Act, obviously on surprise basis, not even a single loose paper or any other document evidencing any unaccounted purchase or sale transaction was found either in the business premises of the appellant company or in the premises of its directors or anyone else. In nutshell, during the course of the search, no adverse material was gathered by the search party which could have warranted the rejection of books of account of the appellant for any of the assessment years. It is submitted that even the AO could not contravene such assertion of the appellant as is evident from para 5 of page No.18 of the assessment order. 7.00 Before the AO it was also submitted that under the M.P. VAT Act, 1994, a surprise inspection and investigation was carried out by the Anti Evasion Bureau of the Commercial-Tax Department in all the business premises of the appellant company on 10-11-2010 and during the course of such surprise inspection not a single discrepancy or defect in maintenance of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Paper Book] as submitted by the appellant company in response to the summons issued to it under s. 131 dated 22-01-2013, the factum of producing the books of account, sales bills, purchase bills, bank statements, registers etc. by the appellant before the AO is clearly evident. Further, even the AO himself at para 2 at page No.2 of the impugned assessment order, has given finding to the effect that the appellant attended the proceedings from time to time and furnished the requisite information with books of account and documents/vouchers. The AO going one step further has also stated the books of account have been examined by test check with reference to return of income and further the bills, vouchers/documents produced have also been verified by test check. It is further submitted that the observation of the AO as regard to non production of the sales bills also gets contravened from the AO's own observation given at para 1 at page No.8 of the impugned assessment order inasmuch the AO has stated that from the pattern of the sales bills issued by the appellant he noted that the sales were made to the amount ranging between ₹ 20 lakhs to ₹ 50 lakhs. Even other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found by the survey team and that the partner of the assessee admitted that these were unrecorded investments in stock. These are not sufficient reasons to reject the books of account. Apart from this, the AO has not pointed out any other defect in the books of account. Likewise, the Hon ble Chandigarh Bench of ITAT in the case of Venus Woollen Mills vs. CIT (2014) 36 ITR (Trib) 0388 (Chd), has also held that it is not necessary the books of account of an assessee should be rejected wherever a survey is conducted and excess stock is found. 9.03 As regard the third observation of the AO that some changes in form No.3CD of the Audit Report were noted, it is submitted that audit reports cannot be equated with the books of account and any changes made in the audit report by the auditors, by themselves, cannot lead to an inference as regard to defect or incompleteness in books of account maintained by the auditee. Even otherwise, it is submitted that there had been two minor additions, through ink pen, in tax audit report in Form No.3CD for A.Y. 2010-11 in column No.21 thereof in which the auditors have added particulars of payments of two more statutory dues covered under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO to the effect that the appellant could not provide the working of gross profit and net profit earned by it on each and every transaction of bank deposit made by it, it is submitted that first of all non-furnishing of any working in any particular manner or design as desired by the AO, by itself, cannot be a ground for rejection of books of account. Further, it shall be appreciated by Your Honour that the AO insisted the appellant to do a job which is practically impossible in any running business with thousands of transactions and millions of turnover. It is submitted that the cash deposits are merely one small part of the conduct of entire trading business which consist of many activities such as purchases, sales, collection through cheques or cash, etc. and, therefore, for an isolated transaction of cash deposit, no gross profit or net profit can be worked out. However, in the instant case it is very pity to submit that the AO, vide queries No.30 and 31 of his notice dated 12-10-2012 [kindly refer PB Page No. 47 to 49], required the appellant to furnish the break-up of each cash deposit in terms of sales bills to which it pertains along with other details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant could not procure its copy of account in their books for the reason that the transactions were old and there were voluminous creditors. As regard the copies of account in the books of the debtors, it is submitted that the appellant had sold goods either on cash basis or on credit basis and for the cash sales there could not have been any case of appellant's account in the ledger of the purchasers and for procuring the copies of its account in the books of debtors it had made request to the debtors but the debtors not being under the control of the appellant such request could be of no avail. In such circumstances, the appellant made a specific request to the AO for issuing either summons under s. 131 or notices under s. 133(6) of the Act, much before the date of expiry of the period of limitation for passing of the assessment order i.e. on 28-01-2013 [kindly refer PB Page No.82]. Such a position has also been admitted by the AO himself at 3rd para of page No.19 of the impugned assessment order. In such a situation, when the AO has not acted upon the request of the appellant to issue summons/notices, made well in advance, no fault could be found on the appellant's p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess stock was arrived at ₹ 1,73,81,069/- i.e. @ ₹ 20,293/- per 10 gms. The appellant made sales of such surplus stock found, which was separately kept, on 28-01-2011 @ ₹ 19,435/- per 10 gms. It is submitted that due to market fluctuation, subsequently the international as well as domestic price of the gold bullion fell down with the result that upon actual sales of the excess stock found, the appellant could fetch a relatively lower amount at which it was valued on the date of search thereby resulting in certain loss. It is submitted that the AO himself while framing the assessment in the appellant's own case, for A.Y. 2011-12, at 1st para of page No.3 of the order, has given a finding that on the aforesaid date of sale i.e. on 28-01-2011, the prevailing market rate of gold was ₹ 1,943/- per gm. i.e. ₹ 19,430/- per 10 gms. In view of such fact, it shall be appreciated by Your Honour that due to fall in the gold bullion rate, the aforesaid loss on sale of surrendered stock resulted to the appellant and therefore, it cannot be a valid ground for rejection of books of account. 9.12 As regard the twelfth observation of the AO that the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it was not possible for it to mention the name and addresses of the customers on cash invoices. The appellant submitted that after receipt of cash against sale of goods, it was not required, either statutorily or otherwise, to keep a record of the name and addresses of the customers who purchased bullion from it against tendering payment in cash. The appellant also brought to the notice of AO that there was no requirement under the commercial tax enactments for maintenance of records as regard to the name and address of the purchasers. It was submitted that such customers can either be investors in bullion or traders of jewelleries but in either case if they wish not to disclose their identity, the appellant could not have compelled them to do so in the interest of his business. Had, the appellant insisted upon its cash customers for disclosing their identity probably the company would have lost a sizable amount of business which would have proved detrimental to the interest of the assessee company. It was further submitted that the nature of the goods traded by the assessee company is that of bullion and, therefore, it is not covered under the category of those sensitive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only reason that whatever sales consideration the appellant company received from such customers had duly been recorded, fully and correctly, in its regular books of account. It was also submitted that during the course of the search proceedings carried out under section 132(1) of the Income-Tax Act, 1961, in the business premises of the appellant company as well as in the residential premises of the directors of the appellant company, no details or documents as regard to the names and addresses of the cash customers were found which fortifies the assertion of the appellant company, to the effect that the appellant company, in its ordinary course of business, was neither required nor it maintained the details of names and addresses of the customers to whom it effected sales in cash. Finally, on the issue of cash memos, it was submitted that the sales of the appellant company were fully verifiable and the same, have consistently been accepted as corrected by the Commercial Tax authorities. It was submitted that even during the course of surprise check and search by the officio of the Commercial Tax Department, in the business premises of the appellant, no case of any sales evas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the allegation of the AO to the effect that the appellant did not preserve the details of identity of the customers for suppressing the sales is misconceived. 10.06 In the similar circumstances the Hon'ble ITAT, Rajkot Bench in the case of ITO vs. Girish M. Mehta (2006) 99 TTJ (Rajkot) 394 has held that for non-maintenance of name of the buyers in the cash transactions, books of account of an assessee cannot be rejected. A copy of the judgment is being submitted herewith for kind perusal and record of Your Honour as Annexure A-7.01 [PB Page No. 117 To 124].The Hon'ble Bench, at paras 15 16, has observed as under: 15. The fact that some of the cash vouchers, the names and addresses of buyers were not fully written, may give rise to reason to doubt regarding genuineness of the sale price, but mere suspicion is not enough for making addition by estimating higher GP rate. For rejecting sale price of cash transactions, the AO has to bring corroborative material on record to reach to the conclusion that sale price of these cash bills were lower than the sale price of credit sale bills in respect of which full names and addresses of the buyers were written. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A-7.03 [PB Page No. 129 To 133]. For a ready reference, the operative para of the judgment in the case of Mahesh T. Patodia supra, is being reproduced as under: 7. The 3rd reason given by the AO is that names and addresses of the customers are not given on the sale bills. The CIT(A) has given a finding that names and addresses are not given both in the purchase as well as sale bills. As far as the purchases are concerned, these are from well-known parties and list of such persons has been given in the paper book at p. 16. Therefore, the finding of the CIT(A) to that extent is factually incorrect and hereby vacated. As far as sales bills are concerned, it is not the case of the AO that names and addresses are not given on all the sale bills. It is only on the cash sale bills that names and addresses are not given. In this connection reference can be made to the Bombay High Court judgment in the case of Jessarm Fatehchand, (supra)wherein it has been held that proviso to s. 13 of 1922 Act [corresponding to s. 145(1)] cannot be applied on the ground that names and addresses of the purchasers are not given in respect of cash sales. Following the same, these reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,73,81,069/- and excess unaccounted cash of ₹ 11,52,550/- was found, it is submitted that the finding given as regard to excess unaccounted cash is factually incorrect. It is submitted that during the course of the search except finding excess stock of ₹ 1,73,81,069/- no other discrepancy was found. Even, in respect of the excess stock, it is submitted that the excess stock by itself cannot be an indicator of unaccounted trading. It is submitted that during the course of the search, the appellant company could not explain the sources of such excess stock and therefore, it was surrendered. 11.02 As regard the second observation of the CIT(A) that the appellant made huge cash sales and cash memos were susceptible to amendment is again a pure guess work. It is submitted that during the course of the assessment proceedings, the appellant had produced its all books of account and sales invoices in soft copies and the AO had not found any case of any manipulation in the invoices so issued. It is also not the case of the AO or CIT(A) that the appellant was found to have booked cash sales of bullion, on any day, at a rate below than the rate prevailing in the market. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple of sale of excess stock at loss. Even, the CIT(A) at para 9.6, p.71 of the Appellate Order has stated that some other dealer had shown 0.10% gross profit rate in A.Y. 2011-12. 11.04.1 It is a settled law that where sales are shown at rates less than market rates, even to close relatives or associates, the assessee cannot be taxed on the basis of having sold the goods at market rates, unless there is material to show that the sales shown are sham transactions or that the higher prices were in fact received by the assessee. Reliance is placed on the following judicial pronouncements: i) Basiram Narayandas Maheshri vs. CIT (1994) 210 ITR 438 (Bom) ii) CIT vs. Das Industries (2008) 303 ITR 199 (All) In the instant case, the AO without finding any defect or discrepancy in the books of account or records of the appellant has rejected the books of account on his own guess work, whims and surmises. The AO failed to appreciate that no incriminating material or document warranting the rejection of books of account was found during the course of search under s. 132 of the Act. The AO mainly on the ground of non-maintenance of records as regard to the identity of the cash buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different. Therefore, we endorse the action of the Assessing Officer and learned CIT(A) regarding rejecting the book results u/s 145(3) of the Act for the assessment year 2011-12. 23.1 Therefore, we dismiss the appeals of the assessee on ground no.2(a) and 2(b) for the assessment year 2011-12. Assessee s GROUND No. 7(a) 7(b) (For A.Y. 2010-11) AND GROUND NO. 6(a) 6(b) (For A.Y. 2011-12) DEPARTMENTAL GROUND NOs. (i) to (viii) (For A.Y. 2010-11) AND GROUND NOs. (iv) to (xi) (For A.Y. 2011-12) 24. These grounds of appeal are directed against the action of the CIT(A) in estimating the G.P. @ 1.25% of the total turnover. In the departmental appeals, the various grounds have been taken against the learned CIT(A) s action in reducing the g.p. addition on sale of gold bullion and silver bullion. 25. Short facts of the case are that the Assessing Officer has, after rejecting the books of account of the assessee, alleged that the assessee used to bring the gold bullion from Ahmedabad to Indore, illegally and the cash is deposited in bank account of the assessee at place where the delivery is given. At para 3.2, the AO has averted that the assessee had deposited cash deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) held that the estimation of gross profit made by the AO was not on sound footing and the same was rejected. At para 9.1, the CIT(A) held that once books of accounts are rejected by invoking the provisions of section 145(3) of the Act, most recognized method is application of assessee s own G.P. rate of earlier years or G.P. rate of comparable cases. At para 9.2, the CIT(A) reiterated the theory of cash sales made by the assessee. The CIT(A) at para 9.2.5 held that the assessee was not maintaining any stock register. The CIT(A) at para 9.6 held that in the case of one other dealer i.e. Shri Omprakash Dhanwani (M/s. Ravi Bullion), the G.P. rate for A.Y. 2007-08 was 1.56 % on a turnover of ₹ 26.15 Crores, while G.P. rate for A.Y. 2011-12 was 0.10 % on a turnover of ₹ 1035.53 Crores and in that case also similar modus operandi of manipulation of cash sales was detected leading to suppression of turnover suppression of profit. The CIT(A) considering that there was sharp increase in turnover, a 20% reduction was allowed in G.P. rate of M/s. Ravi Bullion for the assessment year 2007-08 at 1.56% and the same was taken at 1.25%. The CIT(A) applied the same rate of G.P. i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account as uncalled for, the consequent fallout of such rejection being the impugned additions by way of GP estimations would no longer survive and would deserve to be deleted automatically. 3.00 Without prejudice to the above, it is submitted that it is a settled law that provisions of section 145 do not envisage that by resorting to best judgment assessment the assessing authority must necessarily arrive at a difference figure of income or profit than what has been disclosed by the assessee. Mere rejection of books of account need not necessarily lead to additions to the returned income. It is not necessary for the AO to make addition by way of making estimations. In this regard, reliance is placed on a direct judgment on the issue of the Hon'ble High Court of Rajasthan in case of CIT vs. Gotan Lime Khanij Udhyog (2002) 256 ITR 243 (Raj.). A copy of the judgment is placed at page no. 134 to 140 of the paper book. Reliance is also placed on following judicial pronouncements: i) CIT vs. Dr. A. P. Bahal (2010) 322 ITR 71 (Raj.) i) ACIT vs. D.M. Brothers (2010) 44 DTR (Raj) 13 ii) ITO vs. Arun Kumar Gupta (2006) 103 TTJ (Jd) 134 iii) Satish Katta vs. ACIT (2008) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny concrete basis and as such in his opinion the sales declared by the assessee cannot be disturbed. Once all the four components of the trading account i.e. opening stock, closing stock, purchases and sales are found properly accounted for, the balancing figure essentially has to be taken as gross profit of the assessee. This leaves no scope of disturbing the profit rate. For any reason even if the accounts have been rejected the defects are not so serious which call for any addition in the trading results. The rate difference in sales stands explained due to sales being in the nature of wholesale at the relevant time. Some of the receipt of jewellery from Mrs. Nagar denied by her are found to have resulted into disclosure of profit by the assessee. This cannot be the basis of applying higher rate of profit. Decline in profit rate also cannot be a reason for rejecting the accounts of the assessee. When the results of the assessee are compared with the similar trader like Mehra Sons, the trading results declared by the assessee are found better. Estimation of profit rate without giving any basis by the learned CIT(A) are unwarranted and uncalled for even if the accounts of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r P.B. Page No. 103], it may be observed that the appellant was having opening stock only 1.84 lakhs and closing stock 371.52 lakhs meaning thereby it was having average stock of 186.68 lakhs against the turnover of 9939 lakhs. Thus in other words, the appellant was having stock of 1.87% only, in terms of turnover. It is submitted that had the turnover estimated by CIT(A) was ground reality, the appellant would have earned 1.24 crores giving it rate of return on investment of more than 60% which is not practicable in any trading business. 8.00 In the instant case, the CIT(A) has made the estimation of GP rates, very exorbitantly, without keeping in view the actual margin in bullion trade earned by the other bullion dealers. It is submitted that although for the appellant, the year under consideration was the first year of bullion trade but in case of other bullion dealers namely M/s. Ravi Bullion and M/s. M.P. Bullion, in whose cases too, in pursuance of search under s.132 simultaneous assessment proceedings under s.153A were carried out by the same AO, a reference as regard to the actual GP range could have been taken by the learned AO from the regular assessments under s.14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Book, it shall be observed by Your Honour that for the assessment year under consideration, the appellant company was having owned funds to the extent of nearly ₹ 175.13 lakhs only [i.e. Paid up capital + Share Premium Reserve + Opening Accumulated Surplus] and on such funds, after incurring all administrative and financial expenses and as also the directors remuneration, the appellant has shown net profit of ₹ 45.56 lakhs (before tax) which works out to be nearly 26% which cannot be said to be inadequate or on a lower side. 11.00 The Hon ble Pune Bench in the case of Samrat Beer Bar vs. ACIT (2000) 69 ITJ (Pune) TM 113 has held the view that in a search case, an assessing officer cannot presume that some material relating to earlier period have been destroyed by an assessee particularly in a circumstances when during the course of search each and every investment and expenditure of the person searched is supposed to be unearthed. It was held as under: The very purpose of a search is to take the assessee by surprise and to asses his income on the basis of the evidence and materials found during the search. Once the rationale behind the search is kept in view, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse to the provisions of s. 132. We thus allow ground No. 2(1) of the assessee by holding that the undisclosed income be determined on the basis of assets and expenditure only instead of making any addition on account of under billing, job work and suppression of sales. 13.00 In the instant case, if, it is presumed that the excess stock found during the course of the search was not a result of trading transactions carried out by the appellant then in such circumstances books of account cannot be rejected and estimation of the G.P. can also not be made. However, if, it is presumed that the excess stock was result of the suppression of the profit by the appellant in its books of account then in such a situation, having taxed the excess stock being the result of the suppress profit, no separate addition for such suppressed profit can be made. In other words, for A.Y. 2011-12, the appellant deserves to be granted the benefit of grant of telescoping against the value of excess stock found and surrendered in the return as income. It is submitted that it is a settled law that the issue for grant of telescoping can be raised for the first time before the ITAT. Reliance is placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimation of profit adopted by AO was defective and faulty hence such estimation of income was rejected for all the years in relation to gross profit on sales of gold bullion. Similar defects were also there in estimation of profit by AO on sale of silver bars hence that estimation was also rejected. However, the learned CIT(A) grouped the sales of gold bullion and silver bullion together at ₹ 10,35,53,58,633/- (i.e. gold bullion ₹ 1030,03,690/- and silver bullion ₹ 5,50,01,943/-) for A.Y. 2011-12. Similarly, the learned CIT(A) grouped the sales of gold bullion and silver bullion together at ₹ 585,95,67,563/- (i.e. gold bullion ₹ 584,67,73,769/- and silver bullion ₹ 1,27,93,794/-) for A.Y. 2010-11 and by making enhancement of 17.5% on aggregate sales, the learned CIT(A) applied gross profit rate of 1.25%. 14. We further find that the additions in silver bullion account were made by the Assessing Officer at ₹ 9,65,123/- and ₹ 40,69,563/- in A.Y. 2010-11 2011-12 by estimating gross profit on sale of silver bullion. It was also contended by the learned counsel for the assessee before us that no incriminating documents regarding pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any incriminating documents for the relevant period and better book results in comparison to succeeding years and no defect in books of accounts was found by the authorities below for assessment year 2009-10, therefore, we direct to accept the book results for the assessment year 2009-10. The gold prices were also increased during the relevant period. The average gold price for the period relevant to the assessment year 2007-08 was ₹ 8.36 lacs per kg. which increased to ₹ 16.32 lacs per kg for the period relevant to the assessment year 2010-11 and ₹ 20,72,000/- for the period relevant to assessment year 2011-12. We also observe that whenever there is tremendous increase in the price of gold, the margin of profit shrinks. Gold market is well informed marked and guided by international price. There was VAT of 1% on the recorded trading of gold. Thus, the gross profit estimated on unrecorded sales cannot be applied to the recorded sales as the margin of tax also remains with the seller of unaccounted sales while in the recorded sales the prices are increased by VAT which reduces the margin of profit by the similar amount. The cumulative effect of increase in tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, we hodl that considering the facts and circumstances of the assessee s case, it would be just and fair to estimate g.p. on sale of gold bullion and silver bullion @0.30% as against 0.29% shown by the assessee in its books of accounts. Thus, the ground nos. 7(a) and 7(b) of the appeal of the assessee for assessment year 2010-11 are allowed and ground nos.6(a) 6(b) of the appeal of the assessee for the assessment year 2011-12 are partly allowed. Departmental grounds for both the years on this issue are dismissed. Assessee s GROUND No. 6(a) 6(b) (For A.Y. 2010-11) AND GROUND No. 5(a) 5(b) (For A.Y. 2011-12) 30. These grounds of appeal of the assessee are directed against the action of the CIT(A) in enhancing the income of the assessee by suo-mottu estimating the sales of the assessee 20% higher than that shown in the audited books of account. 31. Short facts of the case are that during the course of the appellate proceedings, the CIT(A) rejected the books of account of the assessee by invoking the provisions of section 145(3) of the Act by using his co-terminus powers. Although, the AO had also rejected the books of account but he had not made any reference of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical grounds with regard to sale of silver bullion. We are also of the view that not only the enhancement made by the CIT(A) in silver bullion account by 17.5% but the application of GP rate of 1.25% applied by the learned CIT(A) is not justified. We, therefore, delete the additions made in silver bullion account for the assessment years 2010-11 and 2011-12. 34.1 Following the above order and looking to the facts and circumstances, we are of the view that we have already given our findings in the preceding paras that during the course of the search proceedings, not a single incriminating document or loose paper was found from which the unaccounted trading of bullion by the assessee could get established. We have also observed that the assessee had maintained stock register and such stock register was duly produced before the Assessing Officer. We also observed that the Revenue Authorities have not brought on record any single instance of any sales having been made at a rate lower than the then prevailing market rate. If the sale is not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos without any basis has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument inventorized as Annexure B-I/12(LPS-4) at page no. 12, the assessee had shown income in ICEX Trading Transactions for the period from 01-04-2010 to 12-11-2010 at ₹ 2,94,82,095/-. The CIT(A) further observed that as against such income of ₹ 2,94,82,095/- shown by the assessee uptil 12-11-2010, income from such transactions was shown by the assessee in its Audited Profit Loss Account for the relevant year at ₹ 1,02,29,852/- only, thereby showing a lesser income of ₹ 1,92,52,243/-. For A.Y. 2010-11, the CIT(A) by applying the ratio of commodity trading income to transaction charges for A.Y. 2009-10 i.e. [Rs.1,48,86,740 / ₹ 81,05,210=1.8366] estimated the income from commodity transaction at ₹ 2,62,21,977/- [i.e. transaction charges ₹ 1,42,76,775 x 1.8366]. Since the assessee had shown income at ₹ 2,05,74,976/- in its Profit Loss Account for A.Y. 2010-11, the CIT(A) directed to make enhancement of an income of ₹ 56,47,000 [Rs.2,62,21,977 (-) ₹ 2,05,74,976] for A.Y. 2010-11. For A.Y. 2011-12, the CIT(A) made a total enhancement of ₹ 2,39,99,497/- i.e. a sum of ₹ 47,47,254/- on the allegation of excess cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 [kindly refer PB Page no.149], was pertaining to the entire period from 01-04-2010 to 31-03-2011. The learned CIT(A) ought to have considered that such loose paper was seized during the course of search under s. 132 which took place on 25-11-2010 and, therefore, there was absolutely no justification to presume that in such loose paper the transactions uptil 31-03-2011 were noted. The fact remained that although as the caption on the loose paper being in the form of provisional Profit Loss Account, the period has been stated to be from 1 April 2010 to 31 March 2011 but the fact remained that such Profit Loss Account was drawn till the date of search only. Accordingly, all the figures of income and expenditure, as stated were as of the date of search i.e. 25-11-2010 only. It was, therefore, the transaction charges were stated on such provisional Profit Loss Account at ₹ 66,13,352/- only [uptil 25-11-2010] which till the end of the relevant previous year i.e. 31-03-2011 raised to ₹ 1,13,60,636/- as shown in the audited financial statements for F.Y. 2010-11 [A.Y. 2011-12]. In evidence of such fact, the copy of ledger account of Transaction Charges in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant previous year at page No.175 of our Paper Book. In view of such fact, it shall be appreciated by Your Honours that the learned AO has compared two unequals i.e. he has compared the income from one commodity exchange till a particular date with the aggregate of income/loss from many exchanges till another date. Had the learned AO compared the profit from ICEX exchange only, as noted in the subject loose paper with the regular books of account, no discrepancy would have been found at his end. In such circumstances, there was absolutely no reason for the learned CIT(A) to make an enhancement of income of ₹ 1,92,52,243/- in the appellant s income on allegation of suppression of commodity trading income. FOR A.Y. 2010-11 Since, the enhancement made by the learned CIT(A) for A.Y. 2010-11 is based upon the various observations made by him for A.Y. 2011-12 and further since we have demonstrated that the observation made by the learned AO for A.Y. 2011-12 were not correct, but patently wrong, no addition on the basis of estimation for A.Y. 2010-11 deserves to survive. Hence the enhancement of ₹ 56,47,000/- made by the CIT(A) deserves to be deleted. 38. The ld. DR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct nexus with the commodity trading income for the reason that such charges are invariably required to be paid at a fixed rate by a dealer/broker in the forward commodity market to the respective commodity exchanges irrespective of the outcome of the transactions. So, even for losses, one would be required to pay the transaction charges. Further, the commodity forward transactions are speculative in the nature and net result of transactions for one year cannot be compared with that of the other year. We find that except making the guess work, the learned CIT(A) has not brought on record any material for his presumption of suppression of commodity trading income. In such circumstances, there was no reason for the learned CIT(A) to estimate the income of the assessee for the assessment year 2010-11 on the basis of transaction charges vis-a-vis commodity income shown by the assessee for the immediately preceding assessment year i.e. 2009-10. Thus, there was no justification for making an enhancement of ₹ 56,47,000/- in the assessee s income on account of commodity trading income for the assessment year 2010-11 and of ₹ 1,92,52,243/- for assessment year 2011-12. We also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42. The Ld. AR for the assessee has made oral as well as written submission as under: The statement referred was only in respect of one division (i) First of all, the Profit Loss Account found and inventorized as B-I/12 [LPS-4] at page no.10 [kindly refer PB page No.149], was only in respect of one of the divisions i.e. MCX division of the company only. It is submitted that besides maintaining such division, the appellant was also maintaining other divisions of businesses through various other commodity exchanges. Further, the appellant was also carrying out the business of bullion in which it had effected turnover in crores. The statement was prepared till the date of search only (ii) Further, the aforesaid loose paper was in the form of a provisional Profit Loss Account of the MCX division of the company for the period from 01-04-2010 to the date of search only i.e. uptil 25-11- 2010. In the statement the salary was stated for 8 months only (iii) The appellant has incurred and claimed salary expenses amounting to ₹ 71,09,000/- for A.Y. 2010-11 and ₹ 72,09,000/- for A.Y. 2011-12. The appellant has incurred such expenses for various divisions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has committed the same error which was committed by him in estimating the commodity transactions based upon BI/12-LPS-4, placed at page no.149 of the paper book. We find that such loose paper is in the form of P L account of one of the several commodity divisions of the assessee i.e. of MCX division and that too, for the period from 01.4.2010 to the date of search i.e. 25.11.2010. Similarly, the loose paper inventorised as BI/1 page no.5 was also in respect of monthly salary paid in one of the divisions. The learned CIT(A) misdirected himself that the salary stated at BI/1 page no.5 was in respect of entire divisions whereas it was only one of the divisions. We find that the assessee has filed the complete details of salary paid to various staff members and the entire salary was paid through account payee cheques. The ld. DR could not controvert such fact by brining any contrary material on record. We also find that during the course of assessment proceedings, the assessee had produced all the books of account and other records before the Assessing Officer and the Assessing Officer had not found any discrepancy in the salary payments recorded by the assessee in its books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed his inability to explain the source of the excess stock of gold bullion, weighing 8562.103 gms., so found and accordingly, admitted the aforesaid sum of ₹ 1,73,81,069/- as the unaccounted investment of the assessee company for the assessment year under consideration. Subsequent to the date of search, the assessee company had recorded the aforesaid excess stock of gold bullion weighing 8562.103 gms. in its stock register without claiming any cost for acquisition of such bullion in its books of account. Subsequently, as on 28-01- 2011, the assessee had sold the entire stock of aforesaid gold bullion, at the then prevailing market rate of the gold bullion in local market i.e. at ₹ 1,943/- per gm., to a third party, for a sum of ₹ 1,66,40,772/-. The necessary entry regarding the aforesaid sales was made by the assessee company in its regular books of account. According to the AO, due to aforesaid sale of stock on 28-01- 2011, there has resulted a loss of ₹ 7,40,297/- to the assessee being the actual sales proceeds of the excess stock at ₹ 1,66,40,772/- vis- -vis the valuation of the excess stock made on the date of search at ₹ 1,73,81,069/-. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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